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Singapore dollar shakes off easing, joining Europe and Japan

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by April 19, 2016 General

The Singapore dollar has regained all its losses from last week after rallying 1.5 per cent against the greenback in the past three trading days. — File picThe Singapore dollar has regained all its losses from last week after rallying 1.5 per cent against the greenback in the past three trading days. — File picSINGAPORE, April 19 — Singapore’s dollar has already undone all of its drop from last week’s surprise easing as central banks worldwide face the limits of monetary policy in weakening a currency.

The local dollar strengthened 1.5 per cent over the past three trading days, after dropping 0.9 per cent against the greenback on April 14, when the Monetary Authority of Singapore shifted to a neutral stance.

The euro strengthened even after European Central Bank President Mario Draghi boosted the region’s record stimulus last month, while the yen surged to the strongest in 17 months last week despite Bank of Japan Governor Haruhiko Kuroda’s introducing negative rates in January.

New Zealand’s dollar has appreciated since central bank chief Graeme Wheeler unexpectedly cut the key rate on March 10.

Traders are paying more attention to the Federal Reserve as futures indicate a less-than-even chance for a US interest-rate increase by December. The Fed pared projections for rate hikes at its March meeting and Chair Janet Yellen said this month the central bank will “proceed cautiously” due to heightened risks in the global economy.

Fed rhetoric’

“Draghi can bring out the bazooka, Kuroda can move into NIRP, Wheeler can cut and MAS can shift to neutral, but all Yellen needs to do is shift some dots and coo dovishness,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “A change in Fed rhetoric to signal rate hikes is needed to really see the Singapore dollar weaken more meaningfully.”

Singapore’s currency gained 0.6 per cent to S$1.3428 versus the greenback at 2.41pm local time. It dropped the most since November on April 14 when the MAS said it would seek a policy of zero appreciation against an undisclosed basket of currencies, returning to a neutral stance it adopted in the global financial crisis in 2008.

The local dollar is set to weaken to S$1.38 this quarter and S$1.40 at the end of the year, according to analysts’ median estimates. A gauge of the greenback fell 0.2 per cent today, approaching a 10-month closing low reached on April 12.

“It’s fascinating that the MAS has eased to levels of monetary policy that haven’t been seen many times outside of a crisis, and yet the Singapore dollar has now wiped out the losses that we saw in that process,” said Callum Henderson, the head of global markets research at Eurasia Group, said in Singapore. “Part of the answer to that is what is happening to the US dollar.” — Bloomberg

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